Big Paper = Big Savings

Collaborative Effort -- Team members who have a hand in creating and deploying sales incentives work together in real time to better understand and, more importantly, significantly improve their decision-making processes.

It’s no secret that the current automotive marketplace is hypercompetitive. As such, to hold if not grow market share, Toyota — along with most other manufacturers — must deploy sales incentives such as cash discounts, special lease rates and low-interest financing to attract and secure buyers.

Incentives in the entire industry have been climbing to historic levels on a per unit basis as consumer’s preferences have shifted to light trucks and SUVS away from passenger cars. The good news on this front is that Toyota is rated as the second-most efficient automaker at such spending. However, our incentive outlay still weighs heavily on our profitability, which is always a prime concern.

That’s why, in May, the TMNA Executive Committee challenged the One Toyota Competitiveness Team to take an up-close-and-personal look at incentives in hopes of finding savings without slowing sales. It’s still in its early days, but it looks highly likely that both objectives will be achieved.

“We put together an Incentives Reform Tiger Team to focus on this issue and we set off on our initial 90-day sprint,” says Tim Bliss, General Manager of One Toyota Competitiveness. “The first step was to improve the collaboration between two great organizations, TMNA and TFS, to better leverage how incentives decisions are currently being made. That’s given us a great framework against which we can begin to make significant improvements.”

Initially, Bliss says the Tiger Team thought it would need to hire an outside consultant to guide it through this incredibly complex undertaking. But, in the One Toyota spirit of collaborating across boundaries, they discovered that the organization already had such expertise in-house.

“When we started looking for project management help, the folks in Project Planning and Management recommended that we partner with Elsha Bodily,” says Bliss. “Elsha came from TEMA, so she brought a process-driven, manufacturing mindset to the project. If we had hired a consultant, we would have spent a lot of time and money just getting that person up to speed on how we do business.”

A Blank Sheet of Paper

Bodily quickly established a process to solicit input from key players in 14 different departments in Sales, Financial Services and the Field. It literally began with a very large sheet of blank white paper attached to a conference room wall at TMNA headquarters. Each group was invited to spend time in the room working with Bodily as they used post-it notes to map out their roles in the incentives decision-making process.

It didn’t take long for the big picture to begin to come into focus.

“Visualization like this has a way of bringing everything to the surface,” says Bodily. “Each of the sessions followed a similar pattern. In the first part of the hour, it moved slowly. But by the end of the meeting, everyone was up at the wall, slamming post-its to the wall representing their business process. They could see the opportunities for improvement, which got everyone excited. Before this exercise, each of the individual teams understood what they did, but they didn’t fully appreciate how that affected the other teams in the process. When we put it on paper, the muda — or waste — became obvious.”

Still, Bodily says each group had to return to the JKK room 3-4 times to ensure they’d fully documented every step in the process. All told, some 80 percent of the time was spent clarifying the current state and the remaining 20 percent brainstorming improvements.

Reaping the Benefits

The benefits of this exhaustive exercise promise to be far-reaching. But Bliss said it has already identified two fundamental changes: 1) shifting TFS from a 30-day commitment for the cost of funds to a 60-day commitment; and 2) shifting from separate processes and TFS cost-sharing arrangements for the Toyota and Lexus brands to one unified approach.

Rest assured, there will be more.

“Another big win will be timing,” says Bliss. “The teams always found a way within the old system to put together the incentives each month. But, inevitably, it was a crunch. Going forward, we are confident they’ll be able to react more quickly and strategically to changes in the marketplace. They’re going to have the time to reflect to make even better and more impactful decisions on incentives. When it’s all said and done, that’s going to have a significant impact on our bottom line.”

If you are interested in learning more about the Big Paper Process, or if you have a problem the Big Paper Process would be useful for, contact TMNA HR Learning Support at training.requests@toyota.com